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Economic impacts of humanitarian aid

Humanitarian aid – whether in-kind or cash transfers – can have a significant economic impact. Potential positive effects include stimulating demand, supporting regeneration of local businesses, job creation and increased tax revenue for governments. Potential negative effects include price inflation, reduced availability of goods, and undermining of local businesses – even leading to closures. The precise impact will vary depending on the context and type of aid modality used. Given the increasing need for humanitarian aid across the world – and in particular for protracted aid stretching over months and even years – it is important to understand the economic effects of this.

This paper aims to answer the following questions:

What are the economic impacts of humanitarian aid?

What is the impact on the local economy?

How is economic impact/gain distributed?

How does economic impact vary with different modalities of aid?

What is the economic impact of humanitarian aid on affected populations, e.g. on their access to credit?